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RBP Process: Investment Methodology



The key to making a successful investment decision is to base that decision on knowable factual information, and avoiding investment decisions that require guesses and conjecture about future events. Because the subjectivity involved in forecasting is inevitably affected by systematic behavioral biases on the part of investors, we believe that the best system of stock analysis determines the market’s implicit forecasts and then benchmarks them against management’s historical ability to deliver.

Our system, the Required Business Performance® (RBP® ) Methodology, seeks to determine the revenue growth required to support each stock at its current price, then calculates a probability, called RBP® Probability, based on historical revenue growth that this required revenue growth will be delivered. Similarly, we believe our Behavioral Risk Indicator shows us the likelihood that behavioral biases have pushed the stock price to a level that makes it difficult for management to deliver the Required Business Performance to support the stock price. We believe this enables us to avoid the subjectivity and bias when trying to forecast the unknowable future.

The methodology is not based on the traditional notion of value, what we think a company is “really” worth, or whether or not a particular stock is a good long-term investment. Our methodology is designed around the answer to a simple question "Can management deliver the required business performance to support the price of its stock?" If management is likely to deliver, we feel the company is worth the investment. Our methodology provides no assurance that it can identify companies that will either deliver the required revenue growth or outperform the performance of other indexes, but we feel the system of analysis puts us in a position of advantage by minimizing the behavioral risk often associated with traditional stock analysis.

Investment Principles

Picking Winners is a Losing Game

Our investment philosophy is disciplined and unemotional. We seek to capitalize on the systematic behavioral biases of other investors by avoiding those stocks we believe are most likely to be irrationally overpriced, while our quantitative selection process potentially prevents us from falling victim to such biases ourselves.

We feel that consistently picking winners requires the ability to predict the unknowable future. Our investment philosophy is therefore to focus on only knowable information, which we believe helps us to avoid losers.

Investment Process

The RBP® Methodology enables Guggenheim to systematically apply a disciplined, rules-based process to each of the core investment functions.

  1. Research
  2. Portfolio construction
  3. Portfolio management

Disciplined Research

Our analysts generate the Required Business Performance® Probabilities of more than 2,000 stocks according to a strict rules system.

Disciplined Portfolio Construction

Each portfolio using this process is based upon a Guggenheim index, which in turn uses the RBP® Probabilities provided by Guggenheim Investments in its construction.

Disciplined Portfolio Management

Portfolio rebalancing only occurs when there is a change in the underlying index components. The portfolio manager has no discretion, eliminating the influence of behavioral biases on his decision making and creating perfect sell discipline.


RBP Funds

  1. Guggenheim Directional Allocation Fund
  2. Guggenheim RBP Dividend Fund
  3. Guggenheim RBP Large-Cap Defensive Fund
  4. Guggenheim RBP Large-Cap Market Fund
  5. Guggenheim RBP Large-Cap Value Fund

RBP® Probability cannot guarantee nor does it predict profit, performance or future stock prices. There is no assurance the RBP® methodology will successfully identify companies that will achieve their RBP® or outperform the performance of other indices.

These funds may not be suitable for all investors. Stock markets can be volatile. Investments in securities of small and medium capitalization companies may involve greater risk of loss and more abrupt fluctuations in market price than investments in larger companies. Unlike many investment companies, the funds are not “actively managed.” Therefore, the funds would not sell an equity security because the security’s issuer was in financial trouble unless that security is removed from its corresponding index. In addition, the funds' return may not match or achieve a high degree of correlation with the return of the index for a number of reasons. The indices are quantitative strategy indices, meaning that each fund invests in securities comprising an index created by a proprietary model. The success of each fund's principal investment strategy depends on the effectiveness of the model in screening securities for inclusion in its corresponding index. The factors used in the quantitative analysis and the weight placed on these factors may not be predictive of a security’s value. As a result, the funds' may have a lower return than if they were managed using a fundamental investment strategy or an index based strategy that did not incorporate quantitative analysis. A fund could become more volatile if its corresponding index concentrates on a particular sector. Please read the prospectus for more detailed information regarding these and other risks.

Transparent Value LLC, an affiliate of Guggenheim Partners, LLC, serves as the index provider for the indices utilizing the RBP Process.

TV LLC is not part of Guggenheim Investments.

Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.

Investing involves risk, including the possible loss of principal.

Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"), which includes Security Investors, LLC ("SI"), Guggenheim Funds Investment Advisors, LLC, ("GFIA") and Guggenheim Partners Investment Management ("GPIM") the investment advisers to the referenced funds. Securities offered through Guggenheim Funds Distributors, LLC, an affiliate of Guggenheim, SI, GFIA and GPIM.

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